Should investors turn their attention to units?
The premium for houses over units has hit record highs, so should investors turn their gaze to units?
With the median capital city house price sitting at $797,287 and the median unit price at a much lower $611,117, the gap between median house and unit prices has increased to 30.5 per cent as of June 2021 — the highest on record, according to CoreLogic’s latest Property Pulse.
In fact, six of the eight capital cities have reached record highs, with Sydney, Melbourne, Brisbane, Adelaide and Canberra recording their biggest gaps between median house and unit values over the past 15 years.
So, is it time for investors to start looking at units?
The lack of international migration and tourism has seen demand for units plummet, creating market room for buyers seeking more affordable options, the founder of Real Estate Gym, Tom Panos, explained on a recent episode of Real Estate Exposed.
Chatting about the possibility that these more affordable units could represent good investment value, Mr Panos explained that houses are likely to win over units in terms of investability, especially in today’s market which leans more towards liveability.
“We’re going to have to learn to live in a world where COVID is going to linger on after we move on. And what that basically means is we’re always going to be concerned about things like, ‘If there’s a lockdown… what’s it better to be living in?’
“And it’s probably better to be living in a house than living in a unit that is in a complex of, say, 300 units.”
But Mr Panos doesn’t believe investors should avoid units altogether. According to him, it all depends on the buyer’s investment strategy.
“You’ve got to make a decision as a buyer — what do I want? Do I want to buy a house that’s going to be in bad condition, but it’s going to have land? It’s going to mean that I’m going to have to do maintenance on it and actually spend a bit of money before I rent it out,” he said.
“If it’s a unit, do I accept that while I’m going to get a much better product in terms of presentation and condition and I’m going to be able to rent it out a lot quicker… I’m also going to end up having lower capital gains?”
While units might never soar in price at the same pace as houses due to the former’s ever-increasing supply, investors can maximise the potential of both markets by diversifying their portfolio smartly.
At the end of the day, it’s all about getting into the property market as soon as possible, he said.
“Investing in real estate is the main thing,” according to Mr Panos.
“Just get into the market, because at the moment, every month you’re not in the market, it’s costing you money.”
Listen to the entire episode of Real Estate Exposed here.
More from this writer:
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Why it’s still worth selling – even in lockdown
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Over 200 Perth suburbs see winter price growth
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Auction volumes on their way back up
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Low interest rates drive record refinancing
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Tassie’s own $20k HomeBuilder grant finds early success
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Capital cities see stronger auction success
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2020 vs 2021: How lockdowns have impacted the market